1

TECHNICAL ISSUES RELATING TO E-FILING OF

TDS & INCOME TAX RETURNS AND OTHER RECENT

AMENDMENTS

BY

C A S ANDESH MUNDRAFCA, DISA, DIRM

SANDESH MUNDRA & ASSOCIATESChartered Accountants

• TAX POEMby the Income Tax Department

• Tax his land, tax his wage,Tax his bed in which he lays.

• Tax his tractor, tax his mule,Teach him taxes is the rule.

• Tax his ties, tax his shirts,Tax his work, tax his dirt.

• Tax his chew, tax his smoke,Teach him taxes are no joke.

• If he hollers, tax him more,Tax him until he's good and sore.

• Tax his coffin, tax his grave,Tax the sod in which he lays.

• Put these words upon his tomb,"Taxes drove me to my doom!"And when he's gone, we won't relax,We'll still be after the inheritance TAX!

1. Brief about the recent changes in the TDS Regime

• Highlights of the PROPOSED new system.• “Then and Now” regarding TDS/TCS payment

scheme• “Then and Now” regarding TDS/TCS Returns

filing scheme• “Then and Now” regarding Certificates

issuance scheme• Filing up Form No. 24C• Amendments in Form Nos.

24Q/26Q/27Q/27EQ• New notifications with regard to Income TAX E-Filing• Recent Amendments in Finance Budget effective

for F.Y. 2009-10 related to TDS• TDS and Direct Tax code• Exercise

SYNOPSIS FOR THE SESSION

1

Notification No - 31/2009 dated 25th March, 2009.

• These rules may be called the Income-tax (8th Amendment) Rules, 2009 which sought to amend Rules 30, 31, 31A, 31AA of the Income Tax Rules.

• Clarification’s circular issued by CBDT on 21st May, 2009.• They shall come into force on the

1st day of April, 2009.

HIGHLIGHTSOF THE NEW

SYSTEM

THE NEW SYSTEM ESTABLISHES 3 BROAD PRINCIPLES FOR ALLOWABILITY OF TDS / TCS CLAIMS:

• Amount has been deposited by the deductor / collector into the credit of the Government

• Information relating to the deductee has been furnished by the deductor / collector to the Tax Information Network

• Claim by the deductee matches the information furnished by the deductor / collector.

“THEN AND NOW”

REGARDING TDS/TCS

PAYMENT SCHEME

PRESENT PROPOSED

• TDS/TCS payment in electronic mode was mandatory only for Corporate deductors and such deductors liable for Tax Audit U/s. 44 AB

• TDS/TCS payment in electronic mode now made mandatory for all type of deductors.

• Challan No. 281 was used for payment of TDS/TCS (electronic and physical payment mode)

• Form No. 17 is to be used for payment of TDS/TCS and the payment has to be in electronic mode only.

PRESENT PROPOSED

• No question of UTNs. Upon making the payment, a Challan Identification No. was allotted by the bank accepting the Tax.

• Unique Transaction Number will be issued upon payment of the tax in addition to the Challan Identification Number. Such UTNs will be issued for every transaction record furnished in the form.

• The above referred CINs were used to be quoted in TDS/TCS Returns Form No. 24Q/26Q/27Q/27EQ and also on Certificates in Form 16/16A/27D.

• The above referred UTNs will now be required to be quoted in Form No. 24C, TDS/TCS Returns in Form No. 24Q/26Q/27Q/27EQ and also on Certificates in Form 16/16A/27D.

“THEN AND NOW”

REGARDING TDS/TCS

PAYMENT SCHEME

PRESENT PROPOSED

• No details (like the deductee, amount paid etc.) of deductions were required while payment. Such details were required while filing the TDS/TCS Returns.

• Details like the PAN of the deductee, Name of the deductee, TDS/TCS done are required to be filled up in Form No. 17 while making the payment itself.

“THEN AND NOW”

REGARDING TDS/TCS

PAYMENT SCHEME

“THEN AND NOW”

REGARDING TDS/TCS

RETURNS FILING

SCHEME

PRESENT PROPOSED

• TDS/TCS Returns were required to be filed quarterly (due dates being 15th July, 15th October, 15th January and 15th June for the last quarter) in Form No. 24Q/26Q/27Q/27EQ.

• TDS/TCS Returns in Form No. 24Q/26Q/27Q/27EQ are now required to be filed for all the four quarters, all at once, by 15th June following the last quarter of the financial year.

• Other than the above referred Form No. 24Q/26Q/27Q/27EQ, no other forms were required to be submitted.

• Instead a TDS/TCS compliance statement is required to be filed in Form 24C on a quarterly basis (due dates being 15th July, 15th October, 15th January and 15th June.)

“THEN AND NOW”

REGARDING TDS/TCS

RETURNS FILING

SCHEME

“THEN AND NOW”

REGARDING TDS/TCS

RETURNS FILING

SCHEME

PRESENT PROPOSED

• The TDS/TCS returns were required to be furnished electronically (at a TIN FC Centre) in the case of a corporate deductor or where the deductor is liable for Tax Audit u/s. 44AB and physically in the case of other deductors /collectors.

• The TDS/TCS compliance statement in Form No. 24C is required to be furnished electronically at the website of the Income tax Department directly i.e. www.incometaxindiaefiling.gov.in Such e-filing is mandatory for all types of deductors.

PRESENT PROPOSED

• In case the deductor/collector is not liable for any TDS/TCS on the payments, though he holds a valid TAN, he is not required to file any TDS/TCS Returns for that period.

• E-filing of Form 24C is mandatory for all the assessees holding a valid TAN, irrespective of whether any payment liable to TDS/TCS has been made or not.

“THEN AND NOW”

REGARDING TDS/TCS

RETURNS FILING

SCHEME

“THEN AND NOW”

REGARDING TDS/TCS

CERTIFICATE ISSUANCE

PRESENT PROPOSED

• The TDS/TCS Certificates issued earlier didn’t provided for the quoting of the UTNs, since the scheme of UTNs was not in existence earlier.

• The amended TDS/TCS Certificates in Form No. 16/16A/27D provide for the quoting of UTNs alongwith the CINs.

• The local bar was so sure that his son was the strongest man around that they offered a standing Rs 1 Lac bet. The son would squeeze a lemon until all the juice ran into a glass, and hand the lemon to others. Anyone who could squeeze one more drop of juice out would win the money.

• Many people had tried over time - weightlifters, strongmen, etc. - but no one could do it. One day a little man came into the bar wearing thick glasses and simple dress, and said in a tiny voice "I'd like to try the bet."  After the laughter had died down, the son said OK, grabbed a lemon, and squeezed away. Then he handed the same to the tiny man.

•   But the crowd's laughter turned to total silence as the man clenched his fist around the lemon and six drops fell into the glass. As the crowd cheered, the bar owner paid Rs 1 Lac, and asked the little man, "What do you do for a living? Are you a wrestler, a weightlifter, what?"

The man replied I am an

__________________

“THEN CAME A DEFERMENT

WHICH POSTPONED

THE CHANGESNo.402/92/2006- MC (11 of 2009)

The Central Board of Direct Taxes have decided to defer the implementation of Notification No.31/2009 dated 25.3.2009 amending or

substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962. The amended /

substituted Rules will now come into effect on 1st July 2009 instead of 1st April 2009.

THEN CAMEANOTHER

MAJOR RELIEF FOREVERYONE

PRESS RELEASENew Delhi dated 30th June 2009The Central Board of Direct Taxes have further decided that the Notification No. 31 of 2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962 shall be kept in abeyance for the time being.

Taxpayers filing their income tax returns for assessment year (AY) 2009-10, or any other earlier AY, may continue to file their returns without mentioning the Unique Transaction Number (UTN) as required under the said Notification. The filing of such returns shall be treated as valid and in compliance to the requirements under section 139 of the Income Tax Act, 1961.

MAJOR RELIEF Further, the date from which the Notification No. 31 / 2009

shall become applicable on tax deducted at source (TDS) or tax collected at source (TCS) and deposited during the current financial year shall be notified by the Central Board of Direct Taxes subsequently.

All deductors / collectors of TDS / TCS may continue to deposit their TDS / TCS and file their quarterly TDS / TCS returns as per procedure existing prior to issuance of Notification No.31 / 2009 dated 25.3.2009.

NEW CHANGES FOR e-FILING IT RETURN FOR AY 09-10

[180 TAXMAN (ST)34]

• New users can register their Digital Certificate during registration process.

• After successful registration of user, User Activation URL sent through e-mail & user have to click on the activation URL & login…..

• …Within 10 DAYS of time period otherwise the account will get expire and user will need to register again.

• Secret Question & Answer has been added as part of registration for more security.

• Existing users can update their secret Q&A after the login.• If the user wants to upload with the Digital Certificate, the user

needs to go to MY ACCOUNT Menu-Update Digital Certificate page.

NEW CHANGES FOR e-FILING IT RETURN FOR AY 09-10

[180 TAXMAN (ST)34]

• Password- strength & confirmation indicator provided for the registration, change password, forget password functionalities.

• During XML file upload any error with the XML file will be displayed to the user at one shot. More than 5 errors will be given as a “CSV” file to the user for download.

• After successful upload, the user can download the ITR vs. ITR Acknowledgement pdf in the success page itself.

• Zipped file needs to be saved in the user's computer to open the file.

• Users can download the utilities/ Scheme for all the years.

ITR-V TO BE FURNISHED AT BANGALORE

• ITR-V is to be furnished to the IT department, CPC, Post Box No. 1, electronic city post office, Bangalore- 560100, Karnataka

• By ordinary post only• Within 60 days of transmitting the data electronically or

30th Sept, 09 whichever is later.• ITR-V sent by Speed post, Register post or courier will

not be accepted.• No form ITR-V will be received in any other offices of the

IT department or in any manner.• You will then get the e-acknowledgement of ITR V.

• The difference between the short and long income tax forms is simple. If you use the short form, the government gets your money. If you use the long form, the tax advisor gets your money.

• A man, was to appear at IT Dept for Assessment, asked his accountant for advice on what to wear. "Wear your shabbiest clothing. Let him think you are a pauper."      Then he asked his lawyer the same question, but got the opposite advice. "Do not let them intimidate you. Wear your most elegant suit and tie.     Confused, the man went to his wisdom guru, told him of the conflicting advice, and requested some solution

• .      "Let me tell you a story," replied the wise man. "A woman, about to be married, asked her mother what to wear on her wedding night. 'Wear a heavy, long, flannel nightgown that goes right up to your neck.' But when she asked her best friend, she got conflicting advice: 'Wear what you are most comfortable at?     The man protested, "What does all this have to do with my problem with the IRS?" 

• "No matter what you wear, you are going to get screwed."

• CHANGES MADE BY THE FINANCE BILL, 2009 IN THE PROVISIONS WITH REGARD TO TDS UNDER THE INCOME TAX ACT, 1961

• W.e.f 1st April, 2009 –o The levy of surcharge has been withdrawn on tax

deduction at source in all cases.

o Education Cess and Higher Education cess are to be included only in case of deductions on payment to salary.

o Please note that the Surcharge (only in case of Companies) and SEC / HSEC (in all cases) continue to be applicable for the purpose of Advance Tax and Self Assessment Tax.

W.e.f 1st April, 2009 –

• 194 A-: Interest Payments

Earlier rates: o To Company = 20%

Revised Rates • To company = 10%

W.e.f 1st October, 2009 –

• 194-I: Rental Payments

Earlier rates: o Plant and Machinery = 10% o Land or building or furniture or fittings to

Individual/HUF = 15% o Land or building or furniture or fittings to Others =

20% Revised Rates w.e.f 1st October, 2009• Plant and Machinery = 2% • Land or building or furniture or fittings to anyone = 10%

• 194-C: Contracts

Earlier rates: • Contracts = 2% • Sub-Contracts = 1% • Advertisement Contracts = 1%

Revised Rates w.e.f 1st October, 2009

• Contracts to Individuals/HUF = 1% • Contracts to others = 2%

Surcharge and Cess No surcharge or Cess is applicable for TDS. Only the specified TDS rates should be considered for deduction Applicable for AY 2010-11 (FY 2009-10).

Payment to Transporters (w.e.f 1-10-09):• For any Transporters, if they Provide the PAN

number, the TDS on contract payments is NIL. • But, if they do not provide the PAN during the

payment, 1% TDS has to be made for Individuals/HUF and at 2% for others.

• Payments to transporters without deducting TDS (as they have quoted PAN) should be reported by Deductor with PAN details to the Income Tax Department in the prescribed format.

• Further w.e.f 01-04-10 rate would be 20% if PAN No. is not quoted.

1.SALARY• Surcharge is not applicable however

already paid can be adjusted.

• With immediate Effect, for TDS / TCS purpose, SEC / HSEC on salary payments made to resident taxpayers is still applicable

10%10%- Land, Build. Furn. etc

2%2%

194 I

- Plant, Machinery

Rent –

10%10%194 HCommission & Brokerage

2%1%- If PAN not given

NILNIL- If PAN Given

Transporter

2%1%Advertisement Contract

2%1%Sub Contractor

2%1%

194 C

Contractor

10%10%Interest (by Bank)

20%10%

194A

Interest

All other Cases

Individual / HUF

Payment to (Recipient)

(wef 1-10-2009)

RATES

SectionNature of Payment

Professional / Technical Fees 194J 10% 10%

Compulsory PAN (Section 206AA)

• It is mandatory to quote PAN in all correspondence, bills and vouchers exchanged between Deductor and deductee.

• TDS shall be made at a flat rate of 20% (or actual rate, whichever is higher) for any payments, where assessee has not quoted the PAN during the payment.

• This is applicable even in case where assessee gives Form 15G/15H u/s 197A.

• This is also applicable for Non resident Payments. • Assessing officer shall not issue the letter for lower/no

deduction, If assessee doesn’t quote a PAN. • Applicable for AY 2011-12 (FY 2010-11). Means the

payments made on or after 01st April 2010.

TDS reconciliation (Section 200A) • A new section 200A is introduced.

• TDS return filed by the deductor will be processed by the following way: o TDS deductible will be computed on the basis of data in TDS

statement, after adjusting any arithmetic error or an incorrect claim.

o The interest, if any, shall be computed on the basis of the sums deductible on the basis of data in TDS statement.

o Any amount payable by / refund to Deductor shall be determined. o Intimation shall be sent to Deductor on Amount payable /

refundable. o The amount refundable, if any shall be granted to Deductor.

• TDS returns o Currently returns have to be filed Quarterly in Form

24Q/26Q/27Q/27EQ o Currently government is not allowed to decide the

Periodicity of TDS returns, as the power is limited only for structure of forms and the manner.

o In order to provide administrative flexibility in deciding the periodicity of such TDS related statements, the existing provisions are modified, so as to allow the Government to prescribe periodicity of such TDS statements besides prescribing their form and manner.

o Applicable from 01st October 2009.

• Computerized processing of TDS returns

• Currently every TDS return involves manual-cum-computerized processing inside the department.

• To make the process efficient, department will computerize whole process, where statements regard to TDS will be processed.

• This will be on the same lines, how IT returns processing has been computerized in Income Tax Department.

• This processing will allow manual interference for Any arithmetical error in the statement.

• An incorrect claim, if such incorrect claim is apparent from any information in the statement, for example, in respect of rate of deduction of tax at source where such rate is not in accordance with the provisions of the Act.

• A Centralized Processing Center may be established in this regard. • Applicable for AY 2011-12 (FY 2010-11).

• Time Limit prescribed for verification of TDS Return Statement and holding a person in default. As per the changes, no order can be passed after a period of two years from the end of the Financial year in which the statement of TDS is filed.

• And if no return filed then four years from the end of the year in which payment /credit is made.

Direct Tax code – TDS Related Provisions

• Payments which are made without deducting tax at source are disllowed. In case deductee has failed to furnish his PAN number, then Tax would be deducted at Penal rate of 20% if the presribed rate is less than 20%.

• U/s 195 Payment of Income shall be deemed to have been made, if paid by a) Cash b) Cheque c) Credit to the account d) Other prescribed mode.

• Both the deductor and the deductee can make applications to AO for certificate of no deduction of Income Tax.

• No exemption for payments to Government exemption on the basis of self declaration forms 15G, 15H etc.

• Rento Def’n of rent has been changed to include any

income derived directly or indirectly from letting out of the property.

o Rate on P&M reduced to 1% and others kept at 10%.

o Overall ceiling kept at Rs. 1.20 Lacs.

• Interesto Interest for residents at 10% and non residents at

20%.o No distinction between interest on securities and

other interest.o Exemption for interest payments to financial

corporations, banks, insurance companies, mutual funds and other notified institutions.

o Rejection to the exemption of interest paid by co-operative bodies to co-operative societies.

o Rejection of exemption of interest payment exceeding Rs. 10,000/- by co-operative banks to its members.

o Exemption is granted for interest on income tax refund.

• Fees for Professional or technical services, Royalty and Non-compete Feeso Tax rate defined at 10%.o Royalty includes transfer of rights in case of live

coverage, cinematographic films, right to use of transmission by satellite, cable, fibre optic.

o No definition for Professional and Technical Serviceso No exemption limit as earlier of Rs.20,000/-.

• Brokerage / Commissiono No definition.o Exemption limit increased to Rs.5,000.o No exemption for brokerage in relation to the

securities transaction.o Rate fixed at 10%

• For all other payments rate would be 10% for residents and 30% for non residents.

• Other Issues

Following Expenses not eligible for deduction in Income Tax Return if TDS not deducted / Paid

• If any expenditure is incurred on account of:-payment of Interest, Commission or Brokerage, Fees for Technical Services, Fees for Professional Services and Payment to Contractors/Sub contractors and;

If TDS is not deducted as per rules or after deduction not paid

The expenditure shall not be eligible for deduction in any year.

If TDS deducted and Paid during the year within time allowed or late but before closure of year

The expenditure shall be eligible for deduction in the year to which it relates.

If TDS deducted in month of March and Paid after closure of year but before due date of filing of return of income

The expenditure shall be eligible for deduction in the year to which it relates.

If deducted TDS is paid after the closure of the year and after the permissible time/date

the expenditure shall be eligible for deduction in the year of payment

Issue 1

• Certain Issues :-Whether TDS is required to be deducted when I have outsourced a manufacturing activity to someone ?

• There was a clarification in the recent budget on this issue which said undertaking manufacturing as per the specification of the customer by using raw material purchase from person other than the customer would not amount to “Work”.

• Issue 2• Whether TDS is deducted on the service tax

portion of the bill?

• As per CBDT circular No. 4 /2008, dated 28-4-2008, no tax is deductible on the service tax portion as it does have the nature of the income.

• Issue 3• Whether payments made to Hotel for room rent

would get covered u/s 194 I where TDS has to be deducted at higher rates ?

• Only if the rooms have been taken on rent under an agreement on a regular basis.

• Where the payment is first made by the employee and is subsequently reimbursed, the question of TDS would not arise.

• Rate contracts entered into by agents are not covered.

• Issue 4• What if you have won a Mercedes Car in

Lottery? Is tax required to be deducted?

• The payer is bound to pay tax. In such a case he needs to ensure that the receiver of the lottery pays the tax and furnishes the proof and only then he should release the prize in Kind.

• Issue 5• In a case where interest compensation is

awarded by the court under compulsorily land acquisition matters? Who is responsible to deduct TDS?

• It is the land acquistion collector who is responsible for deduction of TDS as he is responsible for making the payment and not the court which is just an enforcement agency.

Section 198, 199 do not determine year of chargeability to tax – Sections 4, 5, 28, 145 are charging sections and determine the year of chargeability to tax. Income as per method of accounting regularly followed, credit of TDS is attached to it. Smt. Varsha G. Salunke vs. DCIT (2006) 281 ITR (AT Sec) (Bom.) 55 (TM)

Issue 6

24

Labells sold after the printing logo, trademark as per directions of the customer, is a sale and not a works contract which contrary to Circular No. 715 dated 08/08/95 Question No. 15DBA Ltd. vs. ITO (2006) 281 ITR (Bom.) 99CIT vs. Dabur India Ltd. (2006) 283 ITR (Del) 197

Issue 7

25

Landing fee and parking fee at the airport for aircraft is rent within the definition of section 194I liable for TDS.United Airlines vs. CIT (2006) 287 ITR (Del) 281

Issue 8

26

Specific provision will override the general provision – contractors’ payment specifically covered u/s.194C, will not be covered under general provisions of section 194J.CIT vs. Prasar Bharti (2007) 208 CTR 317 (Del)Glaxo Smithkline Healthcare Services Ltd. vs. ITO (2007) 12 SOT 221 (Del)Each section regarding TDS under Chapter XVII deals with the particular kind of payment to the exclusion of all other sections in this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one sectionRef: CBDT Circular No. 720 dated 30th August 1995.

Issue 9

27

THANK YOU

A nervous taxpayer was unhappily conversing with the TAX officer who had come to review his records. At one point the officer exclaimed, “As a citizen you have an obligation to pay taxes, and we expect you to eagerly pay them with a smile.""Thank God," returned the taxpayer. “Take as many smiles as you want but don’t ask for cash."